With the publication of the “Regulation on Compliance with Participation Principles” by the Banking Regulation and Supervision Agency (BRSA) in the Official Gazette dated 19 December 2025, significant amendments have been introduced to the regulatory framework governing the participation finance sector. With this Regulation, the “Regulation on Compliance with Interest-Free Banking Principles and Standards,” which had been in force since 2019, has been repealed, thereby initiating a new structural phase for the sector.
The scope of the Regulation has been substantially expanded. While the previous framework primarily covered participation banks and a limited number of development and investment banks, the new Regulation now applies to participation banks, development and investment banks operating in accordance with participation principles, savings financing companies, as well as financial leasing, factoring, financing and asset management companies operating based on participation principles.
Under the new Regulation, the concept of “interest-free banking principles and standards” has been replaced with “participation principles.” The authority to determine these principles and standards has been transferred from the Advisory Board operating under the Participation Banks Association of Türkiye to a sector-wide body, namely the Central Advisory Committee. The Central Advisory Committee, to be formed jointly by the Banks Association of Türkiye, the Participation Banks Association of Türkiye, and the Financial Institutions Association and subject to BRSA approval, is expected to be established within six months following the publication of the Regulation. Until the Committee becomes operational, its duties will continue to be carried out by the Advisory Board within the Participation Banks Association of Türkiye.
The Regulation has also tightened the qualification requirements for advisory committee members, increasing the minimum professional experience requirement to ten years. In addition, previous exceptions allowing service on multiple advisory committees have been abolished, and advisory committee decisions are now required to be reported to the Central Advisory Committee on a quarterly basis, replacing the former annual reporting requirement.
Furthermore, the Regulation introduces detailed certification, training and experience requirements for personnel working in the participation finance sector. In particular, personnel involved in sales and marketing activities related to participation-based products are required to hold a BRSA-approved certificate or possess undergraduate or postgraduate education in the field of participation finance.
The responsibilities of the board of directors have also been explicitly defined. Accordingly, the establishment of the compliance framework, prevention of conflicts of interest, implementation of training and public disclosure policies, and the remediation of non-compliance issues fall directly under the oversight and responsibility of the board of directors.
The Regulation provides a six-month period for the establishment of Central Advisory Committees and a one-year transition period for institutions to achieve full compliance with its provisions.
The full text of the Regulation can be accessed here.
NAZALI TAX & LEGAL